63. It falls to HEFCE to make the decisions on the
funding based on the RAE. HEFCE's Board is largely comprised of
representatives from the academic community along with others
from industry and external organisations. Dr John Taylor, the
Director General of the Research Councils, is a member and the
Chief Executives of HEFCW, SHEFC and DELNI attend as observers.
Its decisions are, however, constrained by the budget made available
to it by DfES. The Department will also give broad guidance on
how HEFCE spends its money. In its most recent grant letter to
HEFCE, the DfES asked that it maintain its research funding in
real terms until 2003-04.[110]

64. When they received the RAE results for 2001,
the Funding Councils faced a dilemma. It was generally expected,
not least by universities, that the results would be reflected
in the budget allocations for 2002-03. But funding the new ratings
on the existing basis would cost an extra £206 million, including
£25 million for inflation,[111]
and the overall budget for 2002-03 had been set in the Comprehensive
Spending Review of 2000. DfES initially made it clear that HEFCE
would have to operate within its budget. Immediately after the
RAE results were published, HEFCE announced on 14 December 2001
that it would:

(1) use the results of the RAE 2001 as
the basis for funding research in 2002-03 (despite media speculation
to the contrary);

(2) maintain the unit of resource for 5*
departments;

(3) provide some funding for 3-rated departments;
and

(4) institute a system of safety nets and
caps to moderate the outcomes of these decisions.[112]

65. In January 2002, the DfES announced that it would
make available an extra £30 million for 2002-03 only. HEFCE
announced on 23 January 2002 that:

(1) it would target the additional money
at departments rated 5;

(2) it would provide only £20 million
to 3a-rated departments and nothing for 3bs; and

(3) its priority would be to restore funding
to 4 and 5 departments in 2003-04 if an increase in funding were
secured in the Spending Review 2002.

Table 4 below shows the final allocations
to each rating.
Table 4: Allocation of HEFCE's QR funds to different ratings

2001-02 (using RAE 1996)

2002-03 (using RAE 2001)

Funds (£m)

% of funds

% of staff

Number of depts

Funds (£m)

% of funds

% of staff

Number of depts

5*

188

24

10.8

170

321

38

18.7

326

5

248

32

20.0

403

378

45

36.0

755

4

208

27

27.6

671

122

15

24.8

690

3a

90

12

18.4

528

20

2

12.4

520

3b

33

4

10.9

422

0

0

5.5

279

2

0

0

9.0

464

0

0

2.4

140

1

0

0

3.4

236

0

0

0.2

18

767

100

100.0

2,894

841

100

100.0

2,728

66. Table 5 below shows the changes in funding weights to each
grade. The multiplier used in column 3 is necessary to compare
the 2001-02 and 2002-03 funding weights since funding for 3bs
has been abandoned.

Table 5: Funding rates for different ratings employed
by HEFCE

RAE
rating

Funding weights for:

Change in average unit of resource

2001-02

2001-02 divided by 1.5 for comparison with 2002-03

2002-03

5*

4.05

2.71

2.71

2.5%

5

3.375

2.26

1.89

-12.3%

4

2.25

1.50

1.00

-29.2%

3a

1.50

1.00

0.31

-67.2%

3b

1.00

0.67

0

100.0%

2

0

0

0

Not applicable

1

0

0

0

Not applicable

67. Although these funding decisions have increased the funding
differentials between departments, the level of funding selectivity
between universities has not changed significantly. In
1998-99 75% of the QR funding went to 26 institutions. In 2002-03
75% of funding will go to 24.[113]
Universities were informed of their block grants for 2002-03 on
6 March 2002.

68. The Funding Councils in Scotland and Wales have made different
decisions about the allocations based on RAE 2001. In Wales, the
£60 million QR was allocated as follows: 3b (2%), 3a (8)%,
4 (32%), 5 (38%) and 5* (20%). SHEFC will spend its £132
million formula-based research grant by maintaining its funding
to 5* rated departments in real terms (17% of the total). The
Scottish Executive made available £10 million to fund 5-rated
departments. The remainder will be used to fund 5s, 4s and 'rising'
3as using a 55% escalator system (a researcher in a 4-rated department
would be allocated 55% more than his/her equivalent in a 3a).
Table 6 below shows the different weightings applied in England,
Scotland and Wales.[114]
SHEFC will only fund 'rising' 3as.